The revised story begins at a hastily established emergency hospital in an evidently devastated Tokyo, to which is brought American reporter Steve Martin (Raymond Burr), one of the wounded. In flashback, Martin tells of his stopover in Tokyo on a routine assignment to Cairo for United World News, where he finds himself confronted by the emergence of an inexplicable menace to navigation in the Sea of Japan. Something is causing ships to be destroyed without warning and sink with no time for escape. When a dying seaman finally washes up on an inhabited island, Martin flies there for the story with Tomo Iwanaga, a representative of the Japanese security forces (Frank Iwanaga, also part of the American cast), and learns of the island inhabitants' belief in a monster god which lives beneath the sea, which they believe is causing the disasters (a claim which appears to have been borne out by the crewman before he died). Martin phones his editor at United World News, George Lawrence (Mikel Conrad, part of the American cast) and is given permission to stay and cover the story.

Martin's involvement in the unfolding events broadens when palaeontologist Dr. Yamane (Takashi Shimura, of the original film), is consulted and, returning to the island with his daughter Emiko (Momoko Kōchi) and her young naval-officer boyfriend Ogata (Akira Takarada) to investigate, sees the monster when it attacks the island village. Returning to Tokyo with clear evidence of the monster's existence and power, Yamane becomes a leading consultant to Japan in mounting a defence, as it becomes apparent the monster is going to attack Tokyo.

The Japanese navy is unable to faze the monster with depth charges. In the dark of night, the monster attacks Tokyo, and it proves invulnerable to conventional military weaponry no matter how concentrated. Martin is one of millions injured in the attack, and here the flashback ends: Godzilla (a giant mutant dinosaur) has returned to the sea, but it is certain this is only for the moment.

Emiko reveals she may know a solution to the monster's apparent indestructibility. She loves the young naval officer, but had until recently been engaged to a young scientist Dr. Serizawa (Akihiko Hirata), who was also Steve Martin's friend in college. She has lost interest in him because he has become almost a recluse, to her and others. After her breaking up with him, he revealed to her the reason for his reclusiveness — over the course of his research, he had accidentally developed a formula capable of destroying all oxygen in water, in the process of which any animal coming in contact with the "oxygen destroyer" is stripped clean of all flesh and organs, reduced to a skeleton. His anguish over what to do with this discovery has become a constant preoccupation. She had agreed to keep her knowledge of this a secret. But with Godzilla loose, she realises this may be the only thing capable of stopping the monster, and informs her boyfriend and father.

The scientist is only reluctantly persuaded to use his remaining sample of the oxygen destroyer to try to kill Godzilla, provided he accompanies the young officer, in a diving suit, to the sea bottom to place and release the formula more or less at the monster's feet. After concluding this agreement, the scientist destroys all his notes and papers on the formula. Emiko, upon seeing this, breaks down in tears, as she realises that Serizawa is sacrificing his life's work to stop Godzilla. Once on the bottom of the sea, he sends the young officer back up to the boat, releases the destroyer, and cuts his own oxygen hose and lifeline, to ensure no one else will ever know the chemical composition of his horrid formula. The young officer joins Dr. Yamane, Emiko and Steve Martin on the ship to watch as the oxygen destroyer does its work, reducing Godzilla to a skeleton. Afterwards, Martin's last words were, "The menace was gone, so was a great man. But the whole World could wake up and live again."